Budget deal blunts, but doesn’t erase, increase in Medicare premiums

The tentative budget agreement forged by congressional leaders and the Obama administration will ward off a historic spike in Medicare premiums for the coming year, but it will nevertheless require nearly one in three older Americans to pay 17 percent more in monthly premiums for doctors’ visits and other outpatient care.

Under the agreement, Medicare’s Part B premiums for this group of roughly 15 million people will increase from the current rate of $104.90 per month to $120 per month next year, plus a $3 surcharge. After holding level since 2013, the monthly premiums for these people would have soared to nearly $160 without the legislative adjustment.

According to federal health officials, the adjustment pertains to an estimated 30 percent of the 52 million older Americans expected next year to participate in Medicare’s Part B, the section of the vast federal insurance program for people 65 and older that covers health care services outside hospitals.

This affected group of Medicare patients was ensnared by a wrinkle in federal rules because their insurance premiums are not automatically subtracted from a Social Security check. Among this group are people who do not collect Social Security, will be enrolling in Medicare’s Part B next year for the first time, have incomes great enough that they are charged higher premiums, or are poor enough that they also qualify for Medicaid.

The wrinkle arose because of an existing federal rule, intended to protect older Americans’ federal social insurance, that says that Medicare rates in a given year cannot increase more rapidly than their Social Security checks. Because inflation has been low, federal officials announced recently that, for the third time in the past several years, Social Security benefits will not increase at all in 2016.

Roughly seven in 10 Medicare beneficiaries were “held harmless” because their Part B premiums are withdrawn from their Social Security checks. The unprecedented spike in Part B rates for the rest would have come about in order to keep the Medicare system in actuarial balance.

To cover the cost of moderating the premium increase, the budget agreement would lend money from the U.S. Treasury to the Medicare trust fund. To repay the loan, people on Medicare will be charged the extra $3 fee, starting next year.

A separate health-care part of the budget agreement would eliminate a requirement that the Affordable Care Act is about to impose on large employers. Starting next year, the sprawling health-care law is scheduled to compel employers with 200 or more workers to sign up for health benefits any new worker who does not choose a health plan within three months of being hired. The agreement would negate the requirement.

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